What To Evaluate When Buying a Business

Buying a business can be an exhilarating experience. For many, owning a business is the fulfillment of a decades long dream. You need to carefully evaluate several key factors to help you decide whether or not you are making the best financial and life decision. In this article, we examine five key factors to consider before buying a business.

What Is Being Sold?

If you hate the idea of owning a coffee shop, then why buy one? You have to have a degree of enthusiasm about what you are buying. Otherwise you will experience burnout and lose interest in the business.

How Good Is The Business Plan?

You will want to take a look at the business plan. You will want to know the current business owner’s goals and how they plan on achieving those goals. If they have not been able to formulate a sound business plan then that could be a red flag. You need to see how a business can be grown in the future. A business plan will also outline how they market their products and services. It will also show you how the business compares to other companies.

How Is Overall Performance?

Before signing on the bottom line, answer this question. “How well is the business performing overall?” Factors included in this question include how many hours the owner has to work, whether they use a manager to oversee operations, how many employees are paid overtime and other factors. Answering this question will give you a better understanding of what to expect if you buy the business.

What Do The Financials Look Like?

It is vital to understand the financials of the business. You will want to see profit and loss statements, balance sheets, income tax returns and more. If you are not provided accurate financial information, don’t hesitate to back out of the deal.

What Are The Demographics?

To understand the business it is essential to understand the prospective customers. It should be clear who the customers are, why they keep coming back and how you can retain current customers and add customers in the future. At the end of the day, the customer is what the business is all about.

Carefully evaluate every aspect of the business before buying. Don’t rush into it. Think about how owning the business will impact both your life and your long-term financial prospects.


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